Half-year Report. at June 30, 2013

Transcription

1 Half-year Report at June 30, 2013 (Translation from the Italian original which remains the definitive version) RCS MediaGroup S.p.A. Via A. Rizzoli, Milan Share capital 475,134, Company Registration and Tax Code/VAT no Economic and Administrative Register no

2 Contents Corporate Officers... 3 Group structure of RCS MediaGroup... 5 Brief description of the Group... 6 Consolidated financial highlights of RCS MediaGroup... 7 Report on operations... 8 Group performance in the second QUARTER... 9 Group performance in the first half of the year Other Information Operating segment performance Newspapers Italy Newspapers Spain Books Magazines Advertising Television Corporate Functions Related party transactions Significant events during the first half of the year Significant subsequent events Outlook for the current year Additional information required by CONSOB pursuant to art. 114, paragraph 5 of Italian Legislative Decree 58/1998, provided on May 27, Condensed interim consolidated financial statements Consolidated financial statements Condensed income statement Condensed statement of comprehensive income Condensed statement of financial position Condensed statement of cash flows Condensed statement of changes in equity Notes to the condensed interim consolidated financial statements Format, content and other information on the condensed interim consolidated financial statement items Statement on the condensed interim consolidated financial statements pursuant to art. 154 bis of legislative decree 58/ Annexes List of group equity investments at June 30, Exchange rates against the euro Related parties

3 CORPORATE OFFICERS Honorary Chairman Cesare Romiti Board of Directors (^) Angelo Provasoli Roland Berger Pietro Scott Iovane ( ) Fulvio Conti Luca Garavoglia Piergaetano Marchetti Laura Mengoni Carlo Pesenti Chairman Deputy Chairman Chief Executive Officer Director Director Director Director Director (^) The Board of Directors in office at the date of approval of this Report was appointed by resolution of the shareholders on May 2, 2012, save for Pietro Scott Iovane, who took office following appointment by the board with effect from July 1, 2012, confirmed with resolution of the shareholders on October 16, 2012, and Laura Mengoni, appointed by resolution of the Board of Directors on February 12, 2013 and confirmed by resolution of the shareholders on May 30, On June 28, 2013, Director Giuseppe Rotelli, appointed at the same Shareholders Meeting of May 2, 2012, passed away. The Board will serve for financial years and therefore until the Shareholders Meeting called to approve the financial statements for the last of these years. ( ) Also holds the office of Chief Operating Officer. Powers delegated by the Board of Directors(^) Without prejudice to internal observance, specifically, of the functions and rules of corporate governance adopted, the Board of Directors has delegated in particular all the powers to the Chief Executive Officer and Chief Operating Officer for the conduct of the Company's ordinary administration, as well as a set of powers for the company s management, with limits on the size of financial commitments and/or risks that may be assumed for certain types of transaction. Board of Statutory Auditors (^) Giuseppe Lombardi Franco Dalla Sega Pietro Manzonetto Giorgio Silva Michele Casò Chairman Standing auditor Standing auditor Alternate auditor Alternate auditor (^) The current Board of Statutory Auditors was appointed on May 2, 2012 to hold office for and therefore until the Shareholders Meeting called to approve the financial statements for the last of these years. Vincenzo Mariconda, appointed on the same date as Alternate auditor, resigned on June 12, Independent auditors (^) KPMG S.p.A. (^) In office until the Shareholders Meeting called to approve the 2017 financial statements. (More details about corporate officers can be found in the Report on Corporate Governance and Ownership Structures). 3

4 GROUP STRUCTURE OF RCS MEDIAGROUP 4

5 GROUP STRUCTURE OF RCS MEDIAGROUP 99.86% (1) 99.99% (2) 10 0 % 54.63% (3) 10 0 % 34,5% 45% 44,45% (1) Interest held indirectly (2) Ordinary shares are held at 100% (3) T he preliminary sale agreement was signed on July 11 5

6 BRIEF DESCRIPTION OF THE GROUP RCS MediaGroup is an international multimedia publishing group that operates in daily newspapers, magazines and books, radio broadcasting, new media and digital and satellite TV, and is among the leading operators in the advertising sales and distribution in Italy and Spain. In Italy, the RCS Group publishes Corriere della Sera, leading national paper, and La Gazzetta dello Sport, sporting leader. At June 30, the Group publishes 18 monthly magazines (including Amica, Style Magazine, Dove, Io e il mio bambino and Insieme) and 8 weekly magazines (including Oggi, Io Donna and Il Mondo), 3 bimonthly issues and 1 half-yearly issue published by the Magazines division of RCS MediaGroup S.p.A. On June 19, RCS accepted the binding offer from PRS S.r.l. to purchase 14 magazines, including 10 belonging to the Puzzles Network. The sale agreement was signed on July 29. The Group operates in book publishing under the Fabbri, Bompiani, Rizzoli, BUR, Sonzogno and Lizard brand names, and with publishing houses Marsilio, Adelphi, Skirà and Log607, and holds a stake in R.L. Libri (Rizzoli Longanesi), which is a joint venture with the Mauri Spagnol Group, in the cut price segment, and in Edigita (for the e-book and application markets). The Group has a presence in Italy in textbook, legal, university and professional publishing (with Fabbri, Etas, La Nuova Italia, Sansoni, Tramontana, Oxford University Press, Hachette, Edinumen, Calderini, Edagricole, Edizioni del Quadrifoglio, Markes and La Tribuna) and in partworks (with the Fabbri brand). On July 25, an agreement was signed for the sale of the Partworks business unit, which will no longer be part of the Group s scope of operations beginning on August 1, Through the Advertising division and the subsidiary Blei, the Group performs advertising sales activities mainly for the Group newspapers. Through the associate IGPDecaux it is the absolute leader in the outdoor advertising segment. As regards on-line activities, the Group is active in various platforms for the use of digital content. Among the others in Italy are news site corriere.it, the site dedicated to sport gazzetta.it, the portal for women LEIweb.it created in collaboration with the Group women's magazines, and the portal dedicated to decor and design Atcasa.it as well as numerous other magazine websites (including IoDonna.it, Oggi.it and Max.it as well as Quimamme and Quimammetv). Through control of the DADA Group, RCS also operates in the area of professional services for domain and hosting registration and online advertising. On July 11, RCS announced that the preliminary agreement for the sale of 54.6% of the subsidiary DADA S.p.A. had been signed with Orascom TMT Investments S.à.r.l. The closing is expected to take place on August 7. The RCS Group is present in the television broadcasting segment through Digicast which operates 5 satellite channels (including the extension of the Lei channel) and connected Group websites that are integrated with these channels. Specifically, these include the Lei channel on Sky, which complements the LEIweb.it website and the Dove travel channel. As regards the radio broadcasting segment, the Group holds an interest in Finelco Group, which heads up national broadcasters Radio 105 Network and Radio Monte Carlo, plus Virgin Radio. RCS holds an interest in m-dis (45% in a joint venture with De Agostini and Hearst), a leading distributor to the newsstand channel. RCS also has a major presence abroad. In Spain, the Group is one of the main players in the media segment with the Unidad Editorial Group. The Group publishes El Mundo, Spain's number two daily newspaper in terms of circulation, and is also leader in sports news with the daily Marca and in business news with the daily Expansión. Through the associated websites elmundo.es, and marca.com, it is the leader in the respective news segments. It is present in the magazines market with women s magazine Telva and several specialist magazines (Marca Motor, Actualidad Económica, Golf Digest, Arte, Historia, Siete Leguas). It operates in book publishing with the publishing houses La Esfera de los Libros and A Esfera dos Livros (Portugal). It operates in radio with Radio Marca, the top national sports radio station. In digital TV, it broadcasts four channels: AXN (Sony), Marca TV, Canal 13 and Discovery max. The Group also operates in book publishing in the United States with Rizzoli International Publications and the Universe and HLLA brands, in the magazines segment in China with four different companies, in Mexico with Sfera Editores Mexico SA and in Spain with Sfera Editores Espana SL. The Parent is a publicly listed company on Italy's electronically-traded equities market, organised and run by Borsa Italiana S.p.A. It is headquartered in Via Angelo Rizzoli 8, Milan, and has been registered at number in the Milan Company Register since March 6,

7 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP 2nd quarter 1st half ( /millions) (1) (2) (1) (1) (2) INCOME STATEMENT Revenue EBITDA (3) 10.1 ( 21.9) ( 104.9) ( 28.9) Operating loss ( 8.8) ( 352.1) ( 143.0) ( 379.9) Loss before tax and non-controlling interests ( 14.8) ( 368.1) ( 158.4) ( 407.8) Income taxes 3.8 ( 31.9) 37.6 ( 23.7) Loss from continuing operations ( 11.0) ( 400.0) ( 120.8) ( 431.5) Profit (loss) from assets held for sale and discontinued operations (1) ( 5.9) 0.1 ( 4.1) 2.7 Loss for the period ( 18.2) ( 399.8) ( 125.4) ( 427.0) Basic earnings per share: continuing operations ( 0.117) ( 3.708) ( 1.13) ( 3.99) Diluted earnings per share: continuing operations ( 0.117) ( 3.708) ( 1.13) ( 3.99) Basic earnings per share: assets held for sale and discontinued operations ( 0.055) ( 0.038) Diluted earnings per share: assets held for sale and discontinued operations ( 0.055) ( 0.038) STATEMENT OF FINANCIAL POSITION Jun Jun Dec Net capital employed 1, , ,024.8 Net financial debt (4) , _ of which net financial debt related to assets held for sale and discontinued operations Equity Average number of employees excluding those involved with assets held for sale and discontinued operations 4,470 4,758 4,706 Average number of employees 4,862 5,764 5,558 (1) On September 5, 2012, the sale of 100% of RCS Livres S.A.S. (parent of the Flammarion publishing group) was completed. As from June 2012, the income statement balances of the Flammarion Group and RCS Livres have been classified under Profit (loss) from assets held for sale and discontinued operations. For the sake of consistency, in the 1st half of 2012 and the 2nd quarter of 2012, the Profit (loss) from assets held for sale and discontinued operations was restated to include the costs and revenue of the Flammarion group and of RCS Livres. Furthermore, on March 19, 2013 DADA s Board of Directors voted to comply with the request made by RCS MediaGroup to make the information necessary for the due diligence activities available to the parties concerned in the possible acquisition of the equity investment in DADA. Subsequently, an agreement for the sale of 54.6% of the subsidiary DADA S.p.A. was signed on July 11, Consequently, DADA s revenue and costs for the first half and the second quarter of 2013 were reclassified under Profit (loss) from assets held for sale and discontinued operations and the revenue and costs for the first half, the second quarter and the year 2012 were treated on a consistent basis. The item also includes the net income relating to the San Marco real estate segment, with the exclusion of the historic property located in Via Solferino. (2) 2012 was restated not only with regard to the matters indicated in note 1 but also further to the adoption of the amendment to IAS 19 Employee benefits which led to a positive effect on profit of 2.1 million, a negative effect on profit for previous years of 3.2 million, and a positive effect on the valuation of 1.1 million. (3) Earnings before interest, tax, amortisation/depreciation and impairment losses on non-current assets. (4) Indicator of financial structure, calculated as current and non-current financial liabilities less cash and cash equivalents, current financial assets and non-current financial assets recognised for derivatives. The Half-year Report was approved by the Board of Directors on July 31,

8 REPORT ON OPERATIONS DRAFTED IN ACCORDANCE WITH LAW DECREE 58/1998 AND SUBSEQUENT AMENDMENTS 8

9 GROUP PERFORMANCE IN THE SECOND QUARTER In the second quarter of 2013, the economy in Italy and Spain still showed a recessionary trend on the whole. In particular, according to an initial estimate by Banco de Espana, the GDP in Spain decreased by 0.1% in the second quarter compared to the first quarter of 2013 and by 0.5% in the first quarter of the year compared to the fourth quarter of 2012, a year-on-year reduction of 1.8%, suggesting that the country s economy is slowly coming out of the recession. Based on available information, the Italian GDP also decreased in the second quarter, but at a slower pace (Source: Bank of Italy). The advertising market in the print media segment reported sharp declines. In detail, there was an 18.9% decrease in Spain compared to the second quarter of 2012 (source: I2P), and in Italy advertising market surveys updated to April/May show a 22.2% decrease compared to the same period of last year (Source: Nielsen). The negative advertising market trend is expected to be less severe in both countries in the second half of 2013 (Source: Nielsen/ArceMedia). Reclassified consolidated income statement ( /millions) Reference to consolidated financial statements 2nd quarter 2013 % 2nd quarter 2012 % Difference (5) A B A-B Revenue (50.5) Distribution revenue I (18.8) Advertising revenue (1) I (34.6) Other publishing revenue (2) I Operating expenses II (257.7) (71.1) (297.1) (71.9) 39.4 Personnel expense III (85.9) (23.7) (130.2) (31.5) 44.3 Imp airment losses on receivables IV (5.0) (1.4) (6.8) (1.6) 1.8 Increases in p rovisions for risks V (3.9) (1.1) (0.9) (0.2) (3.0) EBITDA (3) (21.9) (5.3) 32.0 Amortisation of intangible assets VI (11.5) (3.2) (13.9) (3.4) 2.4 Dep reciation of p rop erty, p lant and equip ment VII (6.3) (1.7) (8.9) (2.2) 2.6 Depreciation of investment property VIII (0.2) (0.1) (0.2) (0.0) 0.0 Impairment losses on non-current assets IX (0.9) (0.2) (307.2) (74.4) Operating loss (8.8) (2.4) (352.1) (85.2) Net financial expense X (5.9) (1.6) (7.4) (1.8) 1.5 Gains (losses) on financial assets/liabilities XI (0.2) (0.0) 0.3 Share of loss of equity-accounted investees XII (0.2) (0.1) (8.4) (2.0) 8.2 Loss before tax (14.8) (4.1) (368.1) (89.1) Income taxes XIII (31.9) (7.7) 35.7 Loss from continuing operations (11.0) (3.0) (400.0) (96.8) Profit (loss) from assets held for sale and XIV discontinued operations (4) (5.9) (1.6) (6.0) Loss before non-controlling interests (16.9) (4.7) (399.9) (96.8) (Profit) loss attributable to non-controlling XV interests (1.3) (0.4) (1.4) Loss attributable to owners of the parent (18.2) (5.0) (399.8) (96.8) (1) Advertising revenue from the second quarter of 2013 includes 76.7 million earned through the Group s Advertising concessionaire division (of which 57.3 million by Newspapers Italy, 17.1 million by Magazines, 1 million by Cultural Event and 1.3 million by selling the space of other publishers) and 66.6 million earned directly by publishers (of which 46.1 million by Newspapers Spain, 13.8 million by Newspapers Italy, 2.3 million by Blei, 4.7 million by Magazines, 0.4 million by Digicast and 0.7 million in intragroup eliminations). Advertising revenue from the second quarter of 2012 includes 96.2 million earned through the group s Advertising concessionaire division (of which 69.6 million by Newspapers Italy, 24.3 million by Magazines, 0.4 million by Cultural Events and 1.9 million by selling the space of other publishers) and 81.7 million earned directly by publishers (of which 54 million by Newspapers Spain, 16.3 million by Newspapers Italy, 6.8 million by Magazines, 4.8 million by Blei, 0.6 million by Digicast and 0.8 million in intragroup eliminations). (2) Other publishing revenue mostly refers to revenue from the sale of film rights by the Unidad Editorial group, revenue from the television activities of Digicast and the Unidad Editorial group, royalty revenue from third parties, revenue associated with events and exhibitions in Italy and Spain, and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera group. (3) Earnings before interest, tax, amortisation/depreciation and impairment losses. (4) On September 5, 2012, the sale of 100% of the share capital of RCS Livres S.A.S. (parent of the Flammarion publishing group) was completed. As from June 2012, the income statement balances of the Flammarion group and RCS Livres have been classified under Profit (loss) from assets held for sale and discontinued operations. For the 9

10 sake of consistency, in the 2nd quarter of 2012, the Profit (loss) from assets held for sale and discontinued operations was restated to include the costs and revenue of the Flammarion group and of RCS Livres. Furthermore, on March 19, 2013 DADA s Board of Directors voted to comply with the request made by RCS MediaGroup to make the information necessary for the due diligence activities available to the parties concerned in the possible acquisition of the equity investment in DADA. Consequently, DADA s revenues and costs for the second quarter of 2013 were reclassified under Profit (loss) from assets held for sale and discontinued operations and the revenue and costs for the second quarter of 2012 were treated on a consistent basis. (5) These notes relate to the corresponding headings in the condensed income statement. Total revenue for the second quarter amounted to million compared with million in the same period in the year before. The 50.5 million decrease is attributable to the decrease in advertising revenue ( million) and distribution revenue ( million). Other publishing revenue bucked the trend with an increase of 2.9 million. Of the 34.6 million decrease in advertising revenue compared to the second quarter of 2012, 14.8 million was caused by Newspapers Italy and 7.9 million by Newspapers Spain, which are still penalised by the performance of the press media markets. There was also a decrease in advertising revenue in the Magazines segment (- 9.3 million), greater than the reference market partially as a result of the effects of negotiations underway to suspend some titles, as well as a downturn in advertising revenue of Blei, the foreign media concessionaire (- 2.5 million). The revenue of Digicast (- 0.2 million) and the revenue of the Advertising division generated with publishers external to the Group basically remained stable. The decrease in distribution revenue ( million) compared to the second quarter of 2012 is attributable to: A 9.5 million decrease in distribution revenue in the Newspapers Italy segment, caused by the drop in sales of newspapers and add-on products. The development of digital editions bucked the trend, boosted by the development of the publishing offer on the new multimedia platforms. There was a 7.2 million decrease in distribution revenue for Newspapers Spain due to the general downturn in circulation, mainly relating to El Mundo and Marca. In absolute terms, publishing revenue from add-on products is basically stable compared to the second quarter of A decrease of 3.1 million relating to Magazines distribution revenue, largely as a result of the decreased distribution of family titles. An increase in distribution revenue in the Books segment (+ 1 million), due to the Fiction and Non- Fiction segment, attributable to both the sale of products of other publishers distributed and the sale of own brand products. This trend is only partially offset by the decrease in publishing revenue in other segments, particularly Partworks (- 0.8 million), penalised by a continuation in unfavourable market trends, and Education, particularly due to professional products as a result of the code publication plan schedule, which is different from last year s (- 0.6 million). Other publishing revenue increased by 2.9 million, mainly as a result of revenue earned by Newspapers Spain (+ 4.9 million) for new digital projects and higher television revenue, offset by a total decrease of 1.9 million attributable to Corporate Functions, Television and Magazines. EBITDA was a positive 10.1 million, compared to negative EBITDA of 21.9 million in the second quarter of Excluding non-recurring expense and income, EBITDA would amount to a positive 10.9 million and would be compared to EBITDA of 17.5 million in the same period of 2012, marking a decrease of 6.6 million. The change includes both increases and decreases relative to the various segments of the Group. Decreases in EBITDA in the main business segments, amounting to 17.3 million before non-recurring expense and income, were partially offset by the positive performance of EBITDA before non-recurring expense in the Newspapers Spain and Books segments in the second quarter of 2013, which was up compared to the second quarter of 2012 by 5.1 million due to gradually implemented cost containment initiatives and 5.6 million due to the good performance of Fiction and Non-Fiction Books segment revenue and lower impairment losses on inventory compared to the second quarter of 2012, also as a result of a reduction in returns, respectively. Specifically, before non-recurring expense, Newspapers Italy EBITDA is down 8.9 million as a result of lower advertising revenue and to a lesser extent the drop in sales at newsstands. There was also a decrease in EBITDA before non-recurring expense in the Magazines segment ( 3.1 million), also associated with a reduction in revenue, the Corporate Functions segment (down 2.7 million) due to more consulting required to 10

11 assess company assets and lower recharges of costs incurred, largely for the development of digital activities, the Advertising segment (down 1.4 million) and Digicast (down 1.2 million). In the second quarter of 2013 the cost reduction activities set forth in the Plan continued, part of which were activated during The benefits of these activities in the second quarter of 2013 amounted to 11.8 million in Italy and 12.8 million in Spain. Personnel expense was 85.9 million in the second quarter of 2013 ( million in the second quarter of 2012), down by 44.3 million compared to the second quarter of Excluding net non-recurring income of 1.7 million in the second quarter of 2013 and of 39.1 million in the same period of 2012, there would be a decrease of 3.5 million, as the result of total decreases of 6.2 million and total increases of 2.8 million. In particular, there was a decrease in the cost of labour before non-recurring expense in the Newspapers Spain segment (- 4 million), the Newspapers Italy segment (- 1.2 million) and the Magazines segment (- 1.1 million), partially offset by increases mainly relating to the Advertising segment and Corporate Functions, which were both penalised by the comparison with the second quarter of 2012, which included the recovery of provisions allocated for personnel. The operating loss amounted to 8.8 million in the second quarter of 2013, compared to a loss of million in the same period of Before non-recurring expense and income and impairment losses, the million increase would instead be a decrease of 1.6 million, caused by the 6.6 million decrease in EBITDA which was partially offset by a reduction in amortisation of intangible assets (down 2.4 million compared to the second quarter of 2012) and in depreciation of property, plant and equipment (down 2.6 million compared to the second quarter of 2012). Most of the change in amortisation of intangible assets relates to Newspapers Spain as a result of the past reduction in value of the publications recorded and the progressive reduction in television investments, enacted particularly due to the expected suspension of the broadcast of Marca TV on July 31. The decrease in depreciation of property, plant and equipment mainly relates to the Newspapers Spain due to the conclusion of the depreciation schedules for various types of assets. A summary of the main indicators per business area relating to the second quarters of 2013 and 2012 is shown below: ( /millions) Revenue EBITDA BEFORE NON- % of RECURRING revenue EXPENSE 2nd quarter nd quarter 2012 EBITDA Operating % of % of BEFORE NON- % of EBITDA profit Revenue EBITDA revenue revenue RECURRING revenue (loss) EXPENSE Newspapers Italy % 14.7 (30.3)% 11.2 (35.2)% % % % Newspapers Spain % 9.7 (13.7)% 3.6 (19.9)% % (25.1) (2.2)% (338.3) (9.6)% Books 55.8 (1.5) (2.7)% (3.3) (44.2)% (3.5) (44.7)% 55.3 (7.1) (12.8)% (7.2) (20.7)% (7.5) (21.2)% Magazines 37.5 (5.2) (13.9)% (3.0) (109.0)% (3.4) (109.9)% 50.0 (2.1) (4.2)% (6.6) (9.8)% (6.8) (10.5)% Advertising 79.7 (3.3) (4.1)% (3.8) (13.9)% (3.9) (13.9)% (1.9) (1.9)% (2.1) (4.2)% (6.8) (4.5)% Television % % (1.1) (18.9)% % % (0.3) (44.1)% Corporate Functions 13.0 (4.8) (36.9)% (5.5) (77.7)% (11.7) n.a 14.4 (2.1) (14.6)% (5.2) (17.9)% (10.6) n.a Other and eliminations (78.0) 0.0 n.a 0.0 n.a (97.5) 0.0% (0.1) n.a 0.2 n.a Consolidated total % 10.1 (40.3)% (8.8) (47.0)% % (21.9) (2.0)% (352.1) (8.1)% Assets held for sale and discontinued operations (1) (5.4) Other and eliminations (0.1) Total % 12.3 (36.6)% (14.2) (43.3)% % (17.0) 0.1% (350.0) (5.5)% % of revenue Operatin g profit (loss) % of revenue (1) On September 5, 2012, the sale of 100% of RCS Livres S.A.S. (parent of the Flammarion publishing group) was completed. As from June 2012, the income statement balances of the Flammarion group and RCS Livres have been classified under Profit (loss) from assets held for sale and discontinued operations. For the sake of consistency, in the second quarter of 2012, the Profit (loss) from assets held for sale and discontinued operations was restated to include the costs and revenue of the Flammarion group and of RCS Livres. Furthermore, on March 19, 2013 DADA s Board of Directors voted to comply with the request made by RCS MediaGroup to make the information necessary for the due diligence activities available to the parties concerned in the possible acquisition of the equity investment in DADA. Consequently, DADA s revenue and costs for the second quarter of 2013 were reclassified under Profit (loss) from assets held for sale and discontinued operations and the revenue and costs for the second quarter of 2012 were treated on a consistent basis. Net financial expense in the second quarter of 2013, amounting to 5.9 million, was down 1.5 million compared to 7.4 million in net financial expense in the second quarter of 2012, due to the reduction in interest expense on loans and bank loans and on lease agreements, net of interest rate hedging, for a total of 1 million 11

12 (primarily attributable to the reduction in the interest rate and to a lesser extent to a reduction in average debt compared to the second quarter of 2012). This figure also improved due to interest on arrears not accrued during the period. Net losses of equity-accounted investees amounted to a negative 0.2 million and are attributable to the positive contribution of IGPDecaux ( 1.3 million), the Finelco Group loss and the amortisation of radio broadcasting frequencies which was assigned the goodwill recognised on acquisition. The share of loss of equity-accounted investees amounted to 8.4 million in the second quarter of 2012, basically relating to the 7.5 million impairment loss on equity investments in distribution companies recognised by Newspapers Spain. Profits (losses) from assets held for sale and discontinued operations, amounting to 5.9 million, include the adjustments made for the valuation of DADA group assets held for sale and to a lesser extent the DADA group profit (loss). This compares with 0.1 million recorded in the second quarter of 2012, relating to the profit of DADA, the Flammarion group and Livres. The loss for the second quarter of 2013 is 18.2 million (loss of million in the second quarter of 2012). The increase compared to the loss for the second quarter of 2012 amounted to million and reflects the elements already mentioned, and also includes tax income of 3.8 million ( 31.9 million in tax expenses in the second quarter of 2012). 12

13 GROUP PERFORMANCE IN THE FIRST HALF OF THE YEAR Revenue and expenses pertaining to the DADA group for the first six months of 2013 have been classified as Profit (loss) from assets held for sale and discontinued operations in the Half-year Report at June 30, The income statement from the first six months of 2012, shown in comparison with this Financial Report, has been changed to reflect the revenue and expenses of the DADA group on a consistent basis. The Group's financial highlights and related comments are presented below. ( /millions) Reference to consolidated financial statements Jun % Jun % Difference (5) (4) A B A-B Revenue (108.4) Distribution revenue I (39.7) Advertising revenue (1) I (68.7) Other publishing revenue (2) I Operating expenses II (486.7) (75.1) (546.0) (72.2) 59.3 Personnel expense III (251.1) (38.8) (226.6) (30.0) (24.5) Impairment losses on receivables IV (9.3) (1.4) (9.6) (1.3) 0.3 Increases in provisions for risks V (5.7) (0.9) (3.0) (0.4) (2.7) EBITDA (3) (104.9) (16.2) (28.9) (3.8) (76.0) Amortisation of intangible assets VI (22.3) (3.4) (27.3) (3.6) 5.0 Depreciation of property, plant and equipment VII (12.8) (2.0) (16.1) (2.1) 3.3 Depreciation of investment property VIII (0.4) (0.1) (0.3) (0.0) (0.1) Impairment losses on non-current assets IX (2.6) (0.4) (307.3) (40.6) Operating loss (143.0) (22.1) (379.9) (50.2) Net financial expense X (11.8) (1.8) (13.8) (1.8) 2.0 Gains (losses) on financial assets/liabilities XI Share of loss of equity-accounted investees XII (3.8) (0.6) (14.1) (1.9) 10.3 Loss before tax (158.4) (24.4) (407.8) (53.9) Income taxes XIII (23.7) (3.1) 61.3 Loss from continuing operations (120.8) (18.6) (431.5) (57.1) Profit (loss) from assets held for sale and XIV discontinued operations (4) (4.1) (0.6) (6.8) Loss before non-controlling interests (124.9) (19.3) (428.8) (56.7) (Profit) loss attributable to non-controlling XV interests (0.5) (0.1) (2.3) Loss attributable to owners of the parent (125.4) (19.4) (427.0) (56.5) (1) Advertising revenue from the first half of 2013 includes million earned through the group s Advertising concessionaire division (of which million by Newspapers Italy, 31.5 million by Magazines, 1.6 million by Cultural Events and 2.2 million by selling the space of other publishers) and million earned directly by publishers (of which 78.5 million by Newspapers Spain, 19.1 million by Newspapers Italy, 7.8 million by Magazines, 5.4 million by Blei, 0.9 million by Digicast and 0.8 million in intragroup eliminations). Advertising revenue in the first half of 2012 includes million realised through the group s Advertising concessionaire division (of which million by Newspapers Italy, 44.2 million by Magazines and 3.6 million by selling space of other publishers) and million earned directly by the publishers (of which 95.7 million by Newspapers Spain, 23.5 million by Newspapers Italy, 10.9 million by Magazines, 10.2 million by Blei, 0.9 million by Digicast and 0.8 million in intragroup eliminations). (2) Other publishing revenue mostly refers to revenue from the sale of film rights by the Unidad Editorial group, revenue from the television activities of Digicast and the Unidad Editorial group, royalty revenue from third parties, revenue associated with sports events and exhibitions in Italy and Spain, and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera group. (3) Earnings before interest, tax, amortisation/depreciation and impairment losses. (4) On September 5, 2012, the sale of 100% of RCS Livres S.A.S. (parent of the Flammarion publishing group) was completed. As from June 2012, the income statement balances of the Flammarion group and RCS Livres have been classified under Profit (loss) from assets held for sale and discontinued operations. For the sake of consistency, in the first half of 2012, the Profit (loss) from assets held for sale and discontinued operations was restated to include the costs and revenue of the Flammarion group and of RCS Livres. Furthermore, on March 19, 2013 DADA s Board of Directors voted to comply with the request made by RCS MediaGroup to make the information necessary for the due diligence activities available to the parties concerned in the possible acquisition of the equity investment in DADA. Subsequently, an agreement for the sale of 54.6% of the subsidiary DADA S.p.A. was signed on July 11, Consequently, DADA s revenue and costs for the first half of 2013 were reclassified under Profit (loss) from assets held for sale and discontinued operations and the revenue and costs for the first half of 2012 were treated on a consistent basis. The item also includes the net income relating to the San Marco real estate segment, with the exclusion of the historic property located in Via Solferino. (5) These notes relate to the corresponding headings in the condensed income statement. 13

14 Revenue for the first half of 2013 amounted to million, marking a decrease of million over the first half of Revenue from digital activities, which are transversal across almost all segments of the Group, represent 11.3% of the Group s total revenue (9.3% in the first half of 2012) and reached 73.1 million in the first half of 2013, up 4.3% compared to the first half of In the first half of 2013, advertising revenue came to million, down 68.7 million compared to the same figure from the first half of million of the change is due to lower revenue from Newspapers Italy as a result of an unfavourable trend in the advertising market in the print media segment. The decrease includes the effect on revenue of the suspended publication of City beginning in February The decrease in advertising revenue of Newspapers Italy, which also includes lower revenue in the classified area, is only partially offset by the increase in online advertising revenue (up 4.1% compared to the first half of 2012), achieved despite basic stability in the reference market. In addition, there was a 17.2 million decrease in the advertising revenue of Newspapers Spain compared to the first half of 2012, relating to lower sales of advertising space in newspapers and magazines caused by negative market trends, which were also accentuated by the lack of significant sports events. Advertising revenue also decreased by 15.9 million in the Magazines segment (also due to the effects of negotiations underway to suspend some titles) and by 4.9 million for the investee Blei, the foreign media concessionaire. Distribution revenue decreased by 39.7 million compared to the first half of This was principally the result of the following factors: The downturn in distribution revenue in the Newspapers Italy segment, totalling 16.8 million mostly as a result of lower revenue earned at newsstands and lower sales of add-ons, although there was an increase in digital publishing revenue (+22.6% compared to the first half of 2012). Circulation of Corriere della Sera and La Gazzetta dello Sport decreased. Corriere della Sera remains the leader in overall circulation and in sales through paid-for circulation channels (Source: ADS, May). The 13.3 million decrease in distribution revenue in the Newspapers Spain segment due to a general decrease in copies distributed, while revenue for add-ons remains basically stable. The decrease in distribution of the traditional product is partially offset by the growth in digital editions of Orbyt. The 7.1 million decrease in distribution revenue in the Magazines segment, due to unfavourable trends in the publishing market in general and in the magazines market in particular and the drop in add-on product revenue due to the different publishing schedule and the different type of products offered, as a result of publishing decisions made to better face this difficult context. The decrease in distribution revenue in the Books segment (down 2.5 million) relating to almost all main segment activities. In particular, revenue was down for the US subsidiary Rizzoli International Publications (down 0.9 million), which was negatively affected by contraction in the US market (in which it makes roughly 50% of its sales) and the adoption of a different publishing schedule. Partworks revenue is down 0.7 million compared to the first half of 2012, having felt the effects of the significant and continuous contraction of its market in recent years. Fiction and Non-Fiction revenue is down 0.6 million compared to the first half of 2012, due to products of associates (excluding Marsilio) and other publishers distributed, only partially offset by the positive trend in revenue for own brand products. Publishing revenue totalled 20.5 million in the Education segment and was basically stable, with a slight dip of 0.2 million compared to the same period of Other publishing revenue was essentially stable with respect to revenue in the first half of 2012, as a result of both increases and decreases. Increases largely relate to Newspapers Spain revenue (up 2.8 million) from digital activities linked to new projects and television activities. Decreases are prevalently made up of the 1.1 million reduction due to lower income from the direct marketing of Childhood products in Italy and Spain, which are classified within the Magazines segment. EBITDA is a negative million (down 76 million compared to the first half of 2012). Excluding 76.3 million in non-recurring expense, EBITDA would be a negative 28.6 million, and would be compared with positive EBITDA of 12 million in the first half of 2012 prior to non-recurring expense, marking a 40.6 million decrease. 14

15 Non-recurring expense for the first half of 2013 includes 69.1 million for personnel restructuring plans in the Newspapers Italy, Magazines and Corporate Functions segments and to a lesser extent in the Advertising, Books and Newspapers Spain segments. The restructuring is based on voluntary redundancy incentive plans approved by union representatives and approved in a workers referendum. These plans also include early retirement in the cases permitted by law. Non-recurring expense in the Newspapers Italy segment relates to the current streamlining of the printing process and the resulting closure of a printing facility, as well as expense associated with the Partworks publishing line reorganisation process. The drop in EBITDA prior to non-recurring expense and income and on a like-for-like basis is 40.6 million compared to the first half of 2012 and regards: The decrease in EBITDA prior to non-recurring expense in the Newspapers Italy segment ( million) due to lower advertising revenue, fewer sales of add-ons and decreased distribution, which were only partially offset by benefits deriving from efficiency recovery initiatives. The 7.9 million drop in EBITDA prior to non-recurring expense in the Magazines segment due to the decrease in all revenue components, and in particular advertising revenue from Women s and Childhood products. Please recall that on June 19, 2013, in line with the focalisation activities associated with the Growth Plan, RCS MediaGroup decided to accept a binding offer for the purchase of the business units which publish the magazines Astra, Novella2000, Visto and OK la Salute Prima di Tutto, and the Puzzles Network, which includes Domenica Quiz, Domenica Quiz Mese, Sudoku Top, Piramide Enigmistica, Quizissimo, Cruciverba Top, Corriere Enigmistica, Corriere Enigmistica Junior, Hobby Puzzle and Quiz Ermetici. The 4.8 million decrease in EBITDA before non-recurring expense for the Corporate Functions, mainly arising in the second quarter of 2013 due to consulting fees incurred in the first half of 2013 for the valuation of corporate assets, in addition to the unfavourable comparison with the second quarter of 2012, which included a recovery of provisions allocated for personnel. The decrease in EBITDA prior to non-recurring expense in the Newspapers Spain segment (- 3.3 million), penalised by the contraction in advertising investments and in circulation, and partially improved by the benefits of the new cost reduction plan achieved in the second quarter of 2013, characterised by EBITDA prior to non-recurring expense which was up compared to the second quarter of 2012 (+ 5.1 million), despite the decrease in revenue in the second quarter of 2013 compared to the same period of 2012 ( million). The decrease in EBITDA prior to non-recurring expense in the Advertising segment (- 2.1 million), mostly connected with the Group advertising concessionaire, and to a lesser extent to the subsidiary Blei Spa as a result of lower revenue earned. The 0.9 million decrease in the EBITDA of Digicast before non-recurring expense due to a drop in revenue, higher credit risk and costs for legal disputes. Efficiency recovery and cost reduction initiatives continue. The increase in EBITDA prior to non-recurring expense in the Books segment (+ 1.9 million). Excluding intragroup recharges divided between the various components on the basis of different criteria in the two periods compared, this performance relates to the considerable increases recognised by Fiction and Non-Fiction and Education. Activities relating to the implementation of the Growth Plan, launched in January 2013, proceed in line with expectations on over 90 development and focalisation projects that cover all of the Group s business segments. Aside from numerous projects at the advanced implementation stage, strategic initiatives have already successfully begun in each segment. In fact, to date over 30 strategic development projects from the three-year plan have been implemented, while projects linked to enabling and organisational factors have all been launched and half have gone live. Further acceleration is expected in the coming months, particularly in the strictly digital realm. Some of the main projects completed during the first half and in the first few days of July are briefly mentioned below. In terms of development of publishing, the Diritti e Risposte portal and the I corsivi digital add-ons 15

16 have been launched to increase digital revenue linked with the Group s newspapers. Also, the web series Una mamma imperfetta, produced in collaboration with RAI, was broadcast to increase the range of online videos. To support the distribution of digital editions of Group titles, strategic agreements have been entered into with Telefonica in Spain for Orbyt and with Samsung in Italy to offer Corriere and Gazzetta. The enhancement of the digital product range for mothers involved introducing the Io e il mio bambino smart magazine and the first e-learning platform for parents, Quimamme Academy. The social bent of the Group s core brands has led to the redesign of the La Gazzetta dello Sport community, the launch of Passaparola by Corriere della Sera, of Leifoodie, the Leiweb.it community channel dedicated to food, and Twigis, the first children s social network. RCS has also entered the world of self publishing with Youcrime, the Rizzoli contest revolving around mystery novels with social rules. The acceleration of the Group s international development has brought about a reinforcement in Sfera s business in China and Mexico and the announcement of the Arabic and Colombian versions of Marca. Also from an international perspective, and with the additional aim of increasing and differentiating revenue from sports events, partnership agreements have been entered into for the organisation of the Tour of Dubai and Gran Fondo Giro d Italia cycling races in the US and Israel. New e-commerce targets were also reached with the launches of Football4U.it, the first vertical channel dedicated to football, Libreriarizzoli.it/scuola, dedicated to online sales of textbooks and school-related books for lower and upper secondary schools, and the coupon portal Buonpertutti with Valassis. Furthermore, with a view to enhancing the services offered and the targets achieved, City1Tap, a highly innovative app used to take advantage of citizen structures and services, TamTam, Amica s fashion travel guide app, and the App4Mi project, a start-up competition with the goal of making the Municipality of Milan s open data usable, have all been launched. Lastly, the Group continues to innovate and invest in enabling factors for digital development such as, amongst others, the integrated CRM platform, the new video platform and the sale process automation platform, in which approximately 2 million has been invested to date. At June 30, 2013 the cost reduction activities set forth in the Plan continued, part of which were activated during The benefits of these activities in the first half of 2013 amounted to 18 million in Italy and 17.7 million in Spain, roughly 2 million more than the target for that period. Personnel expense increased by 24.5 million. That change, excluding from that net non-recurring expense for the first half of 2013 totalling 69.1 million, and for the first half of 2012 totalling 38.4 million, would have been an overall decrease of 6.1 million, as a result of decreases relating mainly to Newspapers Spain and increases prevalently in Corporate Functions and Advertising, which were penalised by the comparison with lower figures from the first half of 2012 due to the positive recovery of provisions in that period. The operating loss amounted to 143 million compared with an operating loss of million in the first half of Besides reflecting the phenomena described above, the improvement of million was caused by lower impairment losses on assets in the first half of 2013 ( 2.6 million) compared to the first half of 2012 ( million) and lower amortisation of intangible assets (down 5 million compared to the first half of 2012) and depreciation of property, plant and equipment (down 3.3 million). Most of the change in amortisation of intangible assets relates to the past reduction in the value of publications recognised by Newspapers Spain and the reduction in television investments as a result of the expected suspension of the broadcast of Marca TV on July 31. The decrease in depreciation of property, plant and equipment is due to the natural completion of depreciation schedules in the absence of new investments, the impairment loss on printing facilities recognised at the end of 2012 and the reclassification of the via San Marco real estate segment to Assets held for sale and discontinued operations. In the first half of 2013, impairment losses of 2.6 million include non-recurring expense ( 1.8 million) due to earlier closures of printing presses and plants than was expected at the end of 2012, and to a lesser extent ( 0.8 million), impairment losses on real estate to take into account updated appraisal values. 16

17 Revenue, EBITDA and operating profit (loss) per business segment are summarised below, illustrated in the Operating segment performance section, to which reference should be made for more details. ( /millions) Revenue 1st half st half 2012 EBITDA BEFORE EBITDA NON- % of % of Operating % of BEFORE NON- % of EBITDA Revenue EBITDA RECURRING revenue revenue loss revenue RECURRING revenue EXPENS E EXPENSE Newspapers Italy % (19.7) (30.3)% (28.7) (35.2)% % % % Newspapers Spain (0.6) (0.3)% (2.4) (13.7)% (14.0) (19.9)% % (27.4) (2.2)% (348.4) (9.6)% Books 90.9 (13.1) (14.4)% (18.7) (44.2)% (19.2) (44.7)% 95.0 (15.0) (15.8)% (15.4) (20.7)% (15.9) (21.2)% Magazines 69.9 (14.0) (20.0)% (38.3) (109.0)% (39.0) (109.9)% 93.1 (6.1) (6.6)% (10.8) (9.8)% (11.3) (10.5)% Advertising (7.8) (5.3)% (13.2) (13.9)% (13.3) (13.9)% (5.7) (3.0)% (5.9) (4.2)% (10.8) (4.5)% Television % % (1.8) (18.9)% % % (1.8) (44.1)% Corporate Functions 26.0 (9.3) (35.8)% (15.5) (77.7)% (27.0) n.a 28.5 (4.4) (15.4)% (7.8) (17.9)% (18.6) n.a Other and eliminations (146.1) 0.0 n.a 0.0 n.a (185.7) 0.0% 0.0 n.a 0.1 n.a Consolidated total (28.6) (4.4)% (104.9) (40.3)% (143.0) (47.0)% % (28.9) (2.0)% (379.9) (8.1)% Assets held for sale and discontinued operations (1) (5.0) Other and eliminations (0.2) (0.3) Total (28.6) (4.2)% (99.7) (36.6)% (148.0) (43.3)% % (16.5) 0.1% (372.9) (5.5)% % of revenue Operatin g loss % of revenue (1) On September 5, 2012, the sale of 100% of RCS Livres S.A.S. (parent of the Flammarion publishing group) was completed. As from June 2012, the income statement balances of the Flammarion Group and RCS Livres have been classified under Profit (loss) from assets held for sale and discontinued operations. For the sake of consistency, in the first half of 2012, the Profit (loss) from assets held for sale and discontinued operations was restated to include the costs and revenue of the Flammarion group and of RCS Livres. Furthermore, on March 19, 2013 DADA s Board of Directors voted to comply with the request made by RCS MediaGroup to make the information necessary for the due diligence activities available to the parties concerned in the possible acquisition of the equity investment in DADA. Subsequently, an agreement for the sale of 54.6% of the subsidiary DADA S.p.A. was signed on July 11, Consequently, DADA s revenue and costs for the first half of 2013 were reclassified under Profit (loss) from assets held for sale and discontinued operations and the revenue and costs for the first half of 2012 were treated on a consistent basis. Net financial expense amounted to 11.8 million, compared to net expenses of 13.8 million for the first half The 2 million increase was mainly caused by the favourable drop in interest rates on loans taken out and on bank loans and overdrafts and, to a lesser extent, a reduction in average debt during the period. The share of loss of equity-accounted investees amounted to 3.8 million, compared to net expenses of 14.1 million in the first half of The increase of 10.3 million was caused by the impairment loss recognised in the first half of 2012 to align investments in distribution companies in the Newspapers Spain segment to their fair value, and by start-up costs incurred in the first half of 2012 for the launch of Rizzoli Sfera International Advertising. Excluding these costs from the comparison, there would have been an increase of 1.7 million, mainly due to the improvement in the profit of IGP Decaux compared to the first half of The loss from assets held for sale and discontinued operations was 4.1 million in the first half of This includes the profit of the DADA Group as well as the impairment loss recognised to align this value with the fair value arising from the preliminary agreement for the sale of the entire equity investment, signed on July 11, 2013, net of the associated disposal costs, as well as income recognised in relation to the classification of the San Marco real estate segment, with the exclusion of the historic property located in Via Solferino, which has been classified as an asset held for sale. In the first half of 2012, this item includes the profit from the activities of the Flammarion Group, which was subsequently sold, and the profit of the DADA Group. Income taxes stood at 37.6 million for the first half of 2013, compared to million in taxes for the first half of This change mainly relates to the Newspapers Spain segment ( million), essentially due to higher deferred tax assets allocated, and RCS MediaGroup S.p.A., common parent in the group tax consolidation ( million). Income taxes include Irap (regional business tax) of Italian companies amounting to 3.1 million ( 5 million in the first half of 2012). The loss for the first half of 2013 is million (- 427 million in the first half of 2012), and reflects the trends described above, adjusted by profit attributable to non-controlling interests ( 0.5 million). 17